updates
Best quarter in years
Deutsche Bank earns an unexpected amount
04/27/2022, 12:25 p.m
The restructuring of Germany’s largest bank continues to pay off. The money house made a profit for the seventh quarter in a row.
Despite the uncertainty caused by the war in Ukraine, Deutsche Bank started the year with a surge in profits. “The results of all business areas are on or above plan, and we achieved our highest quarterly profit in nine years,” said CEO Christian Sewing. Germany’s largest financial institution earned the bottom line – after deducting interest on subordinated bonds – 1.06 billion euros, an increase of 17 percent. Analysts had expected only around 950 million euros on average.
Deutsche Bank was thus able to report the seventh quarter of profits in a row. Group income rose by one percent to 7.3 billion euros. “We are therefore in a good position to achieve our goals for this year,” explained Chief Financial Officer James von Moltke. At the same time, however, the bank warned that the current environment was becoming increasingly challenging and that cost pressure had intensified. The Ukraine crisis has the potential to affect annual results, said CEO Sewing.
In the summer of 2019, he initiated a comprehensive restructuring of the group. Entire departments have been closed. The bank parted with particularly risky parts of investment banking and initiated tough austerity measures. In the current year, an after-tax return (ROTE) of eight percent should be achieved with income of 26 to 27 billion euros. By 2025, the return should increase to more than ten percent. In the first quarter it was 8.1 percent.
Increased risk provisions
Deutsche Bank increased its income in its investment banking division by seven percent to 3.3 billion euros in the first quarter. Growth in the Fixed Income and Currencies (FIC) business was 15 percent. However, advisory and underwriting revenues shrank 28 percent. In business with corporate customers, the Frankfurt-based institute was able to increase its income by eleven percent to 1.5 billion euros, in private customer business by two percent to 2.2 billion euros. Due to the uncertain environment, the institute significantly increased its risk provisions in the lending business to EUR 292 million from EUR 69 million a year ago.
The German industry leader made further progress in the important cost/income ratio. The rate fell to 73 percent in the first quarter, after 77 percent in the same quarter of the previous year. This means that 73 cents have to be spent for every euro of revenue.
At the start of the year, the major US banks were struggling, among other things, with the easing of merger fever and fewer IPOs, also as a result of the Ukraine war. The US banking giants Morgan Stanley, Goldman Sachs and Citigroup reported sharp falls in profits for the first quarter. On the other hand, things went well for the Swiss UBS in Europe, which achieved the best start to the year since 2007 in the first quarter. Spain’s largest bank, Santander, also posted first-quarter profit growth, up 58 percent. The scandal-plagued Credit Suisse, on the other hand, is not finding its way out of the crisis in the new year either. The second largest Swiss bank posted a loss of CHF 273 million in the first quarter of 2022 and is changing several positions in top management.